Ticket tax would face several hurdles

Nov. 20, 2011

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What the lease says

Hamilton County's lease with the teams calls for the county to get 25 cents per ticket, whether for baseball, football, or other events.

But, the lease goes on to say:

"... neither the county nor any county entity shall directly or indirectly impose on team a) any sales, service, admission, gross revenue or other tax, assessment, charge or levy in addition to or in lieu of ticket surtax with respect to attendance at games, gate admissions, ticket sales, or revenues from public attendance at games..."

It adds:

"If and to the extent that in any year during the term other taxes are directly or indirectly imposed by county or any county entity on team, such imposition shall not constitute a county default hereunder; however, in such event, county, on or before Feb. 28 of the following year, shall pay to team the amount of such other taxes paid directly or indirectly by team..."

A portion of the charter amendment ballot language says:

"There shall be an amendment to the Cincinnati municipal code at admissions taxes to levy a tax on admissions at professional sports games of the Cincinnati Reds at the Great American Ball Park and the Cincinnati Bengals at Paul Brown Stadium for the purpose of 1) reimbursing Hamilton County for all expenses incurred by Hamilton County in the previous year arising out the exhibition of professional sports at Great American Ball Park and at Paul Brown Stadium."

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As Hamilton County commissioners vote Monday on how to solve a deficit in the fund that pays for the county's riverfront stadiums, there is one option they won't consider - a ticket tax.

Commissioner Todd Portune - who says he's acting as a private citizen - wants to put the idea to voters in May.

It's too late to use a ticket tax to help cover next year's projected $14.2 million deficit, but with a looming deficit for years to come, a long-term solution to the problem can't come soon enough.

And an Enquirer analysis finds that a ticket tax has so many legal questions it may be bogged down in courts for years, experts say.

And a review of the lease itself suggests that any ticket tax money that comes in would go straight to the teams - not the county.

The chief backer of the ticket tax is Portune, a lawyer and frequent Bengal nemesis. He pitched the ticket tax in May as a way to cover the deficit in the stadium fund. He could not be reached for this story.

Under Portune's plan, the tax's amount would be calculated at the beginning of the year based on the deficit projection for the year. Next year's deficit, for example, is projected at $15 million.

If there's no deficit, there would be no tax. The average Bengals ticket is $72; it's $19.19 for the Reds. The ticket tax, according to an Enquirer calculation, could add $14 to the price of a Bengals' ticket and 44 cents to the price of a Reds' ticket.

It would come on top of the city's 3 percent admissions tax. That tax brought in $4.2 million last year.

Portune had hoped to put the tax to Cincinnati voters in November, but didn't have the 7,468 signatures he needed to get it on the ballot. He's now trying for next year and although he doesn't have an official count, he estimated he has about 2,000 signatures.

An Enquirer poll last month found that 63 percent of county residents and 60 percent of city residents support the tax.

But would it violate the lease? Can the city collect the money for the county? Does Portune's involvement - though he insists he's doing this as private citizen, not a commissioner - add more legal hurdles?

Together those are "very difficult questions," said Phillip Sparkes, director of the local government law center at Northern Kentucky University's Salmon P. Chase school of law. "Good lawyers will spend a lot of time trying to figure out what the answer is."

Here are the legal hurdles for the ticket tax:

The lease with the teams

Under the lease, the county already collects 25 cents for every ticket sold at games and other events, like concerts. But the clause that allowed that specifically prohibited any other ticket taxes. If the county "or any county entity" imposes another ticket fee, the least requires the county to send that money to the teams.

The Reds have been mum on Portune's idea, but Bengals vice president Troy Blackburn in a Nov. 11 letter to the county dismissed the idea as "misguided frolic" - and illegal.

Blackburn accused Portune of grabbing headlines for political gain. Portune has twice unsuccessfully sued the team over what he perceives as an unfair lease.

Blackburn added that if a ticket tax is imposed, the team would also view that as a violation of the lease and void any agreement to cap county spending on stadium upkeep.

"We simply cannot be placed in a position of making accommodations to Hamilton County at the very time that its leadership is acting so imprudently and in derogation of the county's legal obligations," Blackburn wrote.

The Bengals declined to comment further.

Stephanie Hoffer, an assistant professor of law at Ohio State University's Moritz College of Law, says because the city charter already allows for an events tax, the teams should know it's possible to add additional taxes.

The county cannot impose the tax themselves; all three commissioners agree on that, including Portune.

"The ticket tax sounds good but is not a realistic option for our stadium problem because it clearly violates the leases with the teams and has zero chance of holding up in court," said Hamilton County Board of Commissioners President Greg Hartmann, who is an attorney. "The lease prohibits the county from raising an admissions tax either directly or indirectly.

"I'm not sure how I could argue this is not an indirect admissions tax," he said.

"He seems to be acting on behalf of his constituents, rather than as a private citizen," Hoffer said. "But the lease forbids him from acting on behalf of constituents, because in doing that he is acting as a commissioner."

Portune said the tax is being pushed by a committee of citizens, who bill themselves as the Cincinnati chapter of Class Action USA (Citizens' League Against Subsidized Sports), not him alone.

"The only legal question is: 'Is this a tax being imposed by the county?'" Portune said. "And I can say it's not being imposed by the county.

"I could walk away and citizens of the city of Cincinnati would continue with the effort," Portune said. "There's a committee of citizens, the petitions contain signatures by citizens of the city, it's a city charter amendment and if gets done it will be approved by the voters of city of Cincinnati."

Collecting the tax

As proposed, the ticket tax is a city charter amendment. It would require the city to collect the tax and then turn it over to the county, which owns the stadiums and is responsible for the debt on them and for their upkeep.

Portune said he's not aware of any state law that prohibits such a collection.

Cincinnati City Solicitor John Curp said he has questions about how such a tax would work, but hasn't done legal research on it since the petitions haven't yet been filed.

"There may be some state constitutional issues having the city collect a tax for the county," Curp said. "But, it's a bit premature for me or the city to roll out a legal case for or against it."

Legal experts also point to the idea of whether it's a city tax

"When a city raises taxes it has to be for a city reason," said Sparkes. "The question here is does the tax serve a valid city purpose?"

"This seems very bizarre to me," Ohio State's Hoffer said. "I'm not sure what the legal mechanism for getting the money from the city to the county would be."

She added: "It is possible for city - especially cities like Cincinnati that are under home rule - to do it because they have broad spending rules."

James Lang, an attorney with the Cleveland-based Calfee, Halter & Griswold, said in order for the city to impose a tax, the city must have a public purpose for the tax.

"The question becomes whether the city's purpose for the tax is a public purpose of the city versus the purpose of helping out their friends at the county," he said. "I expect that's an issue that would challenged."

Mara said Portune's approach works because it's two different governments.

"The lease is between the county and the Bengals and the proposed tax is a city tax," Mara said. "The fact it ends up being revenue sharing with the county I think is a clever way of getting around the problem."